As Desktop Declines, Mobile Search Boosts Google Revenue

Google’s revenue from search ads on U.S. computers fell for the first time last year and will decline another 7% this year, according to a new report, but overall U.S. advertising revenue will continue to rise due to the rapid growth of the mobile ad market.

The report by research firm eMarketer underscores how dramatically the rise of smartphones and tablets is reshaping Google’s business.

Globally, eMarketer estimates that Google’s net advertising revenue will rise 14% to $43.5 billion in 2014, from $38.3 billion in 2013. The research firm did not provide a breakdown of Google’s international ad sales by device.

While eMarketer predicts an accelerated decline in search revenue from desktop computers, to $10 billion in the U.S. this year from $10.8 billion last year, it forecasts mobile search revenue in the U.S. to climb to $5.1 billion this year, from $3.3 billion in 2013.

Google does not disclose detailed figures for its advertising revenue, which also includes display advertising across the web. A Google spokesman declined to comment.

Driving Google’s strength in mobile search advertising are initiatives like enhanced campaigns and product listing ads, says eMarketer. With enhanced campaigns, Google forces advertisers that want to bid for ads in desktop search results to bid on tablets as well. Product listing ads include product images and prices, and are more effective on smartphones than Google’s customary text-based links, say analysts.

Despite the mobile strength, Google faces technical challenges tuning its search engine for smartphones and tablets. Users of such devices spend most of their time in apps, rather than surfing mobile websites. So Google is building an index of content inside apps and placing “deep links” in its mobile search results that point to content inside apps.

Ultimately Google feels it will come out ahead in the transition to mobile, Chief Business Officer Nikesh Arora told a conference of investors in San Francisco last week. Arora said the additional data that smartphones and tablets capture about their users, such as location information, will allow Google to offer better-targeted, and thus more lucrative, advertising products.